This 2019 is also expected to see the enactment of the Flexibility Law or Miscellaneous Law, along with a series of pending technical standards and procedures, to achieve an effective implementation of the Transmission Law.

Issues that will set the energy agenda this year

In recent years, increased competition has been the most prominent aspect of the electricity sector, which has been driven mainly by renewable power plants. This has resulted in a significant drop in supply contract prices, reaching average levels of US$32.5/MWh for the last bidding process for regulated customers and also putting downward pressure on the market for free customers. The year 2019 will follow this trend, although the drop in prices should not be as marked as in previous years. In this regard, one of the main challenges for those developing new projects will be to find attractively priced contracts in order to obtain financing. To date, there are 40 generation projects declared under construction and 34 in testing, all with an estimated commissioning date for 2019, which will add an installed capacity of 1,959 MW to the National Electric System (SEN). Of these, 1,127 MW correspond to renewable generation, mostly wind, although the entry into operation of Cerro Dominador, the first solar thermal plant in Chile, stands out. The remaining 832 MW of thermal generation includes Infraestructura Energética Mejillones, a coal-fired plant that is still in testing and will add 375 MW during 2019. The growth of Small Means of Distributed Generation (PMGD) should also continue this year. From 2015 to 2018, 303 MW have been added, to which 56 MW of PMG type plants have been added, doubling the capacity of small generators these last 4 years. While the above number includes diesel backup plants that fall into this category, most of the growth is related to renewable technology plants, particularly solar photovoltaic. In 2019, 164 MW of renewables should be incorporated, coming from plants that were still in testing at the end of 2018 plus those declared under construction, based on data published by the National Energy Commission (CNE) in December 2018. Meanwhile, natural gas imports from Argentina, which resumed in November 2018 after a decade, are expected to remain available until May 2019. However, import volumes will depend on the consumption of the trans-Andean country and the contractual commitments of local generators with their current gas suppliers. Therefore, the effect of Argentine gas will be limited in the generation sector, being 2019 a key year to check the capacity and willingness of the Argentine government to effectively return to provide a secure and continuous supply to our country.

TOWARDS MATRIX DECARBONIZATION

Regarding the decarbonization of the SEN, in the coming months the government will present the schedule that will reflect the results of the working groups. It is to be expected that the units proposed for decommissioning will be those that are less efficient and have been in operation for several decades. However, during 2019 the discussion of fundamental aspects of this process should continue, such as who will have to assume the indirect costs of decarbonization, whether the proposed schedule will be binding for companies, how the generation that is being retired will be replaced, among others. In relation to the transmission sector, the projects declared under construction by the CNE in December 2018 and that have dates of entry into operation for this year add up to 8 national works, in addition to 14 dedicated transmission projects and more than 40 zonal transmission projects.
The most relevant work expected to come into operation during 2019 is the last section of the 500 kV line between Cardones and Polpaico, a project that has suffered significant delays and that even, according to audits commissioned by the Coordinator, could come into operation in April 2020 in a pessimistic case. With the imminent entry of new generation in the northern zone, this line becomes urgent, since without this work the curtailment to the renewable capacity of this zone could increase. Also the Minister of Energy, Susana Jiménez, announced that during 2019 there will be a tender with supply contracts for regulated customers that would begin to supply in 2025. Confirmation of the amount of energy to be tendered is still pending, however, this tender would be explained by the expiration of some current contracts rather than by the growth in demand, which has been lower than projected by the CNE in previous processes, resulting in the current overcontracting, to which has been added the phenomenon of migration of regulated customers to free ones. In 2017, 428 customers migrated and in 2018 this figure increased with the transfer of 1,129 customers, who have taken advantage of the current market conditions to reduce the cost of electricity supply through direct contracts with generators. The expectation of the CNE for this 2019 is that they will transfer around 400 customers to the free scheme.

NEW LAWS ON HOLD

From a regulatory point of view, the main challenge for 2019 will be the Distribution Law, where relevant changes could be proposed in the mechanisms used to calculate the company’s remuneration, and in the ways of setting the rate of return and evaluating the entry of new marketers. Also for this 2019 is expected the enactment of the Flexibility Law or Miscellaneous Law, as it was named in the Energy Route, along with a series of pending technical standards and procedures, to achieve an effective implementation of the Transmission Law. Finally, electromobility could increase in public transport during 2019, in addition to the 103 electric buses currently in service in Transantiago and the 100 buses already announced for this year. Statements of intent published by the Ministry of Transport, regarding the essential content of the 2018 bases for the tenders, leave the doors open to increase service with electric buses. The mining industry is also opening up to electromobility, starting with pilot projects for passenger transportation, among others. The impulse that the government and the private sector can give to this technological change will have a positive impact on people’s quality of life, to the extent that the generation matrix manages to reduce its emissions. In this sense, the objective of increasing electromobility must be aligned with the effective decarbonization process.